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Use the following information to draw XYZ's yield curve, using: - Average real risk free rate of...

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Finance

Use the following information to draw XYZ's yield curve,using:

- Average real risk free rate of return is constant over 30years at 1%

- Inflation rate over 30 years is expected to be 4% in the firstfive years, 2% in year 6-15, and 1% in year 16-30

- DRP is constant at 1.5%

- LP is constant at 0.5%

- MRP derived from MRP=(t-1)*0.1%

Answer & Explanation Solved by verified expert
3.7 Ratings (561 Votes)
According to the information giveneach data is calculated and YTM is equal to real risk freerate Inflation DRP LP MRPMRP for example is calculated as followsyear 5 5 1 01 04Year    See Answer
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Transcribed Image Text

Use the following information to draw XYZ's yield curve,using:- Average real risk free rate of return is constant over 30years at 1%- Inflation rate over 30 years is expected to be 4% in the firstfive years, 2% in year 6-15, and 1% in year 16-30- DRP is constant at 1.5%- LP is constant at 0.5%- MRP derived from MRP=(t-1)*0.1%

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